Business Setup in India: A Step-by-Step Guide for Foreign Companies (2026)

Thinking about business setup in India but not sure where to start? You're not alone, thousands of foreign companies enter the Indian market every year, and the process is more straightforward than most founders expect.

This guide walks you through every step, from choosing the right legal structure and registering your business to opening a bank account, completing tax setup, and staying compliant with Indian laws.

Why are foreign companies setting up business in India?[toc=Why Choose India]

India is one of the fastest-growing major economies in the world, and foreign companies are paying attention. In 2025, FDI inflows surged 73% to $47 billion, driven by investments in services, IT, and manufacturing.

Here's what's pulling global businesses into the Indian market:

• A massive, skilled talent pool: India produces over 2.5 million STEM graduates every year, the second-highest globally. (See why India is a strategic talent destination)
• Significant cost advantages: Operational costs run 60–70% lower than the US or Western Europe. (Compare the real cost of hiring in India)
• 100% FDI is allowed in most sectors under the automatic route, no government approval needed.
• Government incentives that reward expansion: Startup India offers tax benefits, easier compliance, and fast-tracked IPR for eligible businesses. PLI schemes across 14 sectors have already attracted over ₹1.88 lakh crore in actual investment.
• A digital-first regulatory framework: The regulatory framework is largely digital, from filing forms online with the MCA to getting a digital signature certificate in hours.
• Growing business opportunities across sectors: A target market of 1.4 billion consumers and a rapidly expanding middle class creates business opportunities across IT, manufacturing, fintech, healthcare, and SaaS.

India isn't just a cost play anymore. It's where many entrepreneurs are building their next growth engine.

For companies exploring different ways to scale, you can refer to this article on how to outsource work from the USA to India for effective strategies to manage operations remotely.

So what are your actual options for setting up here? Let's break them down.

What are your options for business setup in India?[toc=Options to Setup Business in India]

From our experience helping 300+ global companies enter India, the right business structure depends on how much control you need, how fast you want to start, and how long you plan to stay.

Here are seven ways a foreign company can set up business operations in India.

1. Private Limited Company (Wholly Owned Subsidiary)

This is the most popular route for foreign companies wanting full control. Your parent company can hold 100% of the shares as a separate legal entity.

You need a minimum of 2 directors and 2 shareholders. At least one director must be an Indian resident.

100% FDI is allowed under the automatic route in most sectors. Registration takes 7-15 working days through the SPICe+ form on the MCA portal.

It offers limited liability, perpetual existence, and the ability to raise venture capital. Best for companies planning long-term business activities in India.

2. Limited Liability Partnership (LLP)

An LLP blends the flexibility of a partnership firm with the liability protection of a company. You need a minimum of 2 partners, and at least one must be an Indian resident.

Foreign nationals and NRIs can be partners, subject to FDI norms. 100% FDI is permitted under the automatic route in eligible sectors.

There's no minimum capital requirement, making it a cost-effective legal structure. Compliance is lighter than a private limited company.

Best for professional services firms, consulting businesses, and small business ventures testing the Indian market.

3. Branch Office

A branch office is an extension of the foreign company, not a separate legal entity. It can handle export/import, consulting, IT services, and technical support for the parent company.

It cannot engage in manufacturing or retail trading on its own. Requires prior approval from the Reserve Bank of India.

The parent company must have a profit-making track record for 5 years and a net worth of at least $100,000. Best for foreign companies wanting a physical presence without incorporating an Indian company.

4. Liaison Office

A liaison office is a representative office, it cannot earn revenue or conduct business transactions in India. It acts as a communication bridge between the parent company and the Indian market.

Activities are limited to market research, promoting products, and facilitating collaborations. All expenses are funded by the parent company through inward remittances.

Requires RBI approval, and initial permission is typically granted for 3 years. Best for foreign companies exploring business opportunities before committing to a full business setup.

5. Project Office

A project office is a temporary setup for executing a specific project in India. It's usually established after winning a contract from an Indian company.

Activities are restricted to the scope of the approved project. It closes once the project is completed.

Requires approval from the Reserve Bank of India. Best for construction, engineering, and infrastructure firms with defined timelines.

6. Joint Venture

A joint venture pairs a foreign entity with a local Indian partner to share resources, risks, and market knowledge. It's ideal for sectors where 100% FDI isn't permitted.

The Indian partner brings local expertise, distribution networks, and regulatory know-how. Can be structured as an equity JV or a contractual collaboration.

Requires thorough due diligence on the Indian partner. Best for foreign companies entering regulated sectors or wanting local market access.

For a deeper dive into establishing a presence in India, check out our guide on setting up a captive center for a more structured, long-term approach.

7. Employer of Record (EOR) - Hire Without an Entity

An EOR lets you hire and pay employees in India without setting up any legal entity at all. The EOR becomes the legal employer, handling payroll, taxes, compliance, and onboarding.

Learn how EOR works in India & the best EOR services in India

You manage the employee's day-to-day work and performance. Setup takes days, not months, most companies begin operations within 1–2 weeks.

Pricing starts as low as $99/month per employee. No need for a registered office address, bank account, or local permits. (See detailed EOR pricing)

You can start with EOR and transition to your own entity later when ready. Best for startups and companies hiring their first 1–50 employees in India. (Build a GCC in India)

To understand the difference between an Employer of Record and an own entity, refer to this detailed guide on "Employer of Record vs Own Entity in 2026"

If you're thinking about quick market entry, take a look at our article on building an offshore team in India for an alternative to setting up a full entity.

With seven distinct paths into India, choosing the right one is a business strategy decision, not just a legal one.

Let's look at how to make that choice.

How do you choose the right business structure?[toc=Choosing the Right Structure]

Having guided companies from seed-stage startups to Fortune 500s through this exact decision, we've seen one thing consistently, the best structure isn't the most popular one, it's the one that matches your timeline, budget, and level of commitment to India.

This comparison makes the choice clearer:

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Here's a simple way to think about it:

Want full control and plan to scale beyond 50 employees? Go with a private limited company or wholly owned subsidiary.

Need to hire a small team quickly without legal overhead? An Employer of Record gets you operational in days.

Just exploring India as a target market? A liaison office or EOR lets you test the waters without a long-term commitment.

Many companies start with an EOR and transition to their own entity once the team grows. (Here's how to build a GCC in India step by step)

Once you've picked your structure, the next step is registration. Here's exactly how that process works.

What's the step-by-step process to register a company in India?[toc=Step-by-Step Registration Process]

Setting up a business in India involves a series of simple but critical steps to ensure your company is legally registered and compliant.

Here's the process you’ll follow for a smooth business setup in India.

1. Reserve Your Company Name

The first step in the registration process is to ensure your business name is unique and not already in use. This can be done via the Ministry of Corporate Affairs (MCA) portal.

2. Get Digital Signature Certificates (DSC) and Director Identification Numbers (DIN)

Every director of your company must have a Digital Signature Certificate (DSC) for filing documents online. Additionally, a Director Identification Number (DIN) is required to identify directors.

3. File SPICe+ with the Ministry of Corporate Affairs

SPICe+ is a unified form used to incorporate a company, apply for PAN and TAN, and register for EPFO/ESIC (if applicable). This form simplifies the entire process, making registration faster.

4. Get Your PAN, TAN, and GST Registration

These registrations are mandatory for conducting business operations in India. PAN and TAN are required for tax-related matters, while GST registration is needed for businesses involved in taxable goods and services.

5. Open a Business Bank Account

After getting your Certificate of Incorporation, open a corporate bank account in India to begin financial transactions under your company’s name.

6. Complete FDI Reporting with the Reserve Bank of India

If your company is a foreign entity or involves foreign investment, it’s essential to report the Foreign Direct Investment (FDI) to the Reserve Bank of India (RBI) within 30 days of the investment.

By completing these steps, you ensure your business is legally recognized in India and compliant with local laws in India.

Read more: Company Registration in India: A Complete 2026 Guide

Next, let's explore the necessary documents that foreign companies need to prepare for setting up a business in India.

What documents do foreign companies need?[toc=Required Documents]

When setting up a business in India, foreign companies must ensure they have the correct documentation in place.

From our experience helping global businesses navigate Indian regulations, here’s what you’ll need to prepare.

1. Certificate of Incorporation

This document officially registers your company with the Ministry of Corporate Affairs (MCA) and confirms its legal existence in India.

2. Memorandum of Association (MOA) and Articles of Association (AOA)

These foundational documents define your company’s structure, purpose, and rules of operation. They must be submitted during the incorporation process.

3. Proof of Identity and Address of Directors

Directors must provide valid government-issued identification (like a passport or Aadhaar) along with proof of their residential address (e.g., utility bill or rental agreement).

4. Registered Office Address Proof

You need to provide the address of your company’s registered office in India. This address will be used for official correspondence.

5. Foreign Investor Documents

If you're a foreign investor, you’ll need to submit additional documentation, including proof of nationality and the source of funds for investment.

These documents are crucial for establishing a foreign company in India and ensuring compliance with local laws.

Now that you’re familiar with the necessary documents, let’s move on to key considerations foreign investors should be aware of before setting up a business in India.

What should foreign investors consider when setting up a business in India?[toc=Key Considerations]

When setting up a business in India, foreign investors need to consider some critical factors. Based on our experience helping international companies navigate Indian regulations, here’s a quick guide on what to keep in mind.

• FDI Policy: India allows 100% Foreign Direct Investment (FDI) in most sectors under the automatic route. This makes market entry smooth for foreign investors.
• Business Structure: Popular options for foreign investors include a Wholly Owned Subsidiary, Joint Venture, or Branch Office. Each has its benefits depending on your business goals and operations.
• Resident Director: At least one director in the company must be a resident of India. This is a requirement under the Companies Act and ensures proper governance.
• Tax and Regulatory Compliance: Understanding India’s tax framework, including GST, and compliance with local and central laws, is essential for smooth operations. Partnering with local experts ensures you stay on track.
• Investment Route: Whether you’re going through automatic FDI or seeking government approval, it’s important to follow the right route to avoid delays.

These considerations will guide you in choosing the right structure and ensuring your business setup is fully compliant. Let’s now look at what steps to follow once your company is incorporated to stay compliant in the long run.

What post-incorporation compliance is required for businesses in India?[toc=Post-Incorporation Compliance]

After incorporating your business in India, there are essential post-incorporation steps to ensure compliance with Indian regulations. From our experience helping foreign companies, here's what you need to keep in mind:

1. Bank Account Activation: Once your company is incorporated, submit your documents to the bank to activate your corporate bank account.
2. Auditor Appointment: Appoint an auditor within 30 days of incorporation to handle financial statements and ensure tax compliance.
3. Commencement of Business: File a declaration form to officially begin business operations in India.
4. Tax Registration: Complete your GST registration, and if applicable, services tax and other industry-specific taxes based on your business activities.
5. Ongoing Compliance: Regularly file your annual returns, maintain proper accounting records, and comply with state and central labor laws.
6. Foreign Direct Investment (FDI) Reporting: If applicable, complete FDI reporting with the Reserve Bank of India.
7. Register with the Shop and Establishment Act: This is necessary to comply with labor laws governing working hours, wages, and employee rights.

Keeping track of these compliance requirements ensures your business runs smoothly without legal complications.

Next, let's explore how much it costs to set up a business in India and the timeline to expect.

How much does it cost to set up a business in India?[toc=Cost of Setting Up Business in India]

The costs for setting up a business in India can vary based on several factors. Here’s a breakdown of typical costs you can expect:

• Company Registration Fees: Fees depend on the company type and authorized capital. The government charges a registration fee, typically ranging between ₹6,000–₹10,000.
• Digital Signature Certificate (DSC): Required for directors, typically costing ₹1,500–₹2,500 per director.
• Director Identification Number (DIN): This is a required registration for each director and usually costs around ₹500 per director.
• Professional Services: Fees for legal, accounting, and compliance services can range from ₹10,000 upwards depending on the complexity of the business structure.
• Other Miscellaneous Costs: These include costs for document filing, name reservation, and office setup.

Timeline:

• Company Name Reservation: 1-2 business days.
• Digital Signature & Director Identification: 1-3 days.
• SPICe+ Filing: 3-7 business days.
• PAN & TAN Generation: Issued alongside SPICe+ approval.

The entire process typically takes 7-14 business days.

If you’re looking to streamline this process and ensure full compliance from day one, Wisemonk can assist you in setting up your business in India.

Let’s explore how we can support your company setup.

How Wisemonk EOR Simplifies Business Setup in India[toc=Wisemonk EOR]

Wisemonk is a trusted Employer of Record (EOR) in India, empowering global companies to hire, manage, and onboard employees without the need to establish a local legal entity. From compliance to payroll and employee support, we handle the complexities so you can focus on scaling your business.

Here’s how Wisemonk makes expanding into India easier and more efficient:

• End-to-End Employment Compliance: We ensure all statutory requirements are met under Indian labour laws, the Companies Act, and the Income Tax Act, including tax filings, provident fund registration, and local compliance.
• Recruiting and Onboarding Support: Tap into India’s top talent across various sectors with our expert recruiting team and access to a pre-vetted network of professionals.
• Equipment Procurement and Setup: We provide everything your remote teams need, including hardware, software, and office essentials, to ensure smooth operations from day one.
• Background Verification: We perform thorough background checks, including criminal, address, and employment history, to ensure your hires are reliable and compliant.
• HRBP and Employee Support: Our HR business partners manage everything from employee onboarding to engagement, helping you foster long-term, productive teams.

Beyond these, Wisemonk also supports global companies with contractor management, company registration, visa & work permit assistance, Offshore Team Setup and GCC setup in India. Whether you’re hiring one employee or building a full-scale India operation, Wisemonk helps you set up, scale, and stay compliant, all under one platform.

By choosing us as your trusted partner, you can focus on your core operations while we handle the complexities of your business in India. Reach out to us now!